I always hear and read about how New Jersey is a tough place to invest but that is all that's mentioned. I live in NY and I'm looking to house hack in either Newark, Jersey City, or the Oranges. What makes these areas so tough? I know property taxes can be a bit steep but you can find a house for 300k in NJ (fixer upper) as opposed to NY. What are some laws/items I should be aware of before investing? What makes NJ so unique?
Investor · Cresskill NJ/Pigeon Forge, TN · Member since 2014 · 84 posts · 41 votes
7y
This is a long post but I've given a lot of thought to this over the last few years....
I live in NJ and own a few multi-family properties so not an expert but seasoned enough. There are a few things I look for in NJ when evaluating a property:
- The town and the property's location in it. Is the town solid middle class and stable. Is it generally safe especially where the property is located. Some invest in rough areas and make good money but I just don't want to deal with the hassle of confronting non-paying tenants and having to evict tenants often and/or pushing them to pay late rent fees. That's just me.
- The property. Lots of people on BP ask what towns to invest in....but really every house is different. I think you need to really evaluate deal by deal. There are a lot of solid middle class towns in NJ but there are not many properties that make sense from a cash flow investment perspective in those towns. So the town is important but the deal is just as important. If you don't have both, it's a no go.
- Taxes. Does the property have reasonable taxes. You can find properties that simply have lower taxes. Not very low since it's NJ but lower than others.
- Rent- What would the rents be for the given property once it's rehabbed. I look at Zillow/Trulia and CraigsList to see what is for rent in those towns given the number of bedrooms/bathrooms and finishes of the apartment. I take a good hard look at the pictures and try to figure out whether my prospective property is going to look similar to what I see. I then estimate a conservative rent to cover myself.
- Heating/Cooling- Is each apartment separately metered for heat? If they are great, but a lot of multi-families are not. Is it oil heat? If so that's a lot more expensive than gas heat. For a 3 family I was paying $6K a year for heat. I switched to gas and it's down to $2.5K. It costs me $12K to make the switch- done with permits.
- Rehab- Cracked foundations, leaning houses, completely new wiring and/or plumbing needed, underground oil tank, I'm probably not going to take that deal. For me it's too risky and frankly you can find other deals that don't have these issues. New furnace and water heater, new floors, new wallboards/ceiling tiles, painting the walls, new kitchen cabinets, patching the roof or a new roof, new siding, new windows- These are all doable and the costs are fairly easy to calculate. You just have to make sure you thoroughly evaluate what needs to be repaired versus replaced. For rentals- not everything needs to be rehabbed. For a flip you need to typically rehab more and with better quality.
- Property location- As many have said, no houses on double yellow lined roads, next to gas stations, across from schools/cemeteries or other funky locations. No flood zone houses.
- The final analysis- I look at how much I have to spend to buy and rehab, what I think the property will appraise for and rent for after I rehab then I crunch the numbers. I want to see decent cash flow (different for everyone) and the ability to get money out of the deal after 6 months- the time you have to hold the property and have rents to refinance at a higher appraised value. Here are actual numbers from a 2 family house that I'm rehabbing right now in Englewood. Bought for $450K. About $38K to renovate it. 4 bedrooms and 2 baths per apartment with a 2 car garage and another garage that can fit a commercial vehicle. I'll rent both garages out as well.
Realtor · Rutherford, NJ · Member since 2016 · 51 posts · 46 votes
7y
New Jersey has the second highest percentage of households that earn more than $150,000 per year but the high incomes are offset with high expenses. Some of the things that make NJ a tough market is the proximity to NYC. Because of this, the demand is high which naturally increases prices as well. Another issue is labor rates are also higher than other parts of the country as well it even differs within the state (North vs South). One of the other issues as you mentioned is the property taxes 560 municipalities in total and they all have school districts. But there are always deals out there if you are patient and have your finances lined up.
Flipper/Rehabber · Toms River Ocean County, NJ · Member since 2019 · 53 posts · 29 votes
7y
Any market is penetrable if the numbers are right. Although holding costs in NJ is generally higher due to the unbelievably high property taxes in many counties. So make sure you have calculated that into your cash flow projection.
As far as rent control goes, from my experience in Hudson County, it could be a deterrent, but not if you take those items into consideration. Also consider that once a tenant moves out, you can rehab the apartment and ask for higher rent (actually that how it was in the late 1980's, so don't quote me on that!!)
Flipper/Rehabber · Toms River Ocean County, NJ · Member since 2019 · 53 posts · 29 votes
7y
Rules and regulations also differ from town to town. I'd focus on an area you are interested in, then learn all there is to know from that town's rules and regulations. For example, some towns require an occupancy certificate, others don't. Some towns need you to register as the landlord. Some homeowner's associations require permission for a dumper. You just never know until you do your research.
@Account Closed I guess I am having trouble with finding all the town's rules and regulations. I find going to the town's website isn't all that helpful. Do you typically go there in person?
Good luck Marsha. I wish you well. Stay dedicated and focused. It takes time and effort to learn all the in's and out's. Just go right down there and simply ask for help.
I'll tell you a quick story......
When I needed to file a lawsuit, I did all the research, online, at the courthouse, etc... After filing the paperwork and representing myself, the attorney for the other party demanded to know who was the attorney that I was working with, because, "there is no way you prepared this without help." He was shocked when I told him the information is out there, and that it wasn't hard to do. In retrospect, I probably insulted him indirectly when I said that, but the point I am making is, with enough determination and effort, you can learn anything.
@Account Closed Thanks for that push Martha. Since I live in NY, I was trying to see if I can cut corners by finding everything strictly online but I am now realizing I have to use all the resources available but it will be worth it.
Haha! Thanks for sharing that story. You remind me of Dory so now I will just have to "just keep swimming." I hope your lawsuit went in your favor. It inspires me to hear when people are successful in this industry.
@Account Closed I live in Suffolk, Long Island and I am looking at Newark/Jersey City. It's about a 2 hour drive for me without traffic. I have friends who are in Newark that I could crash at so I guess they will be seeing me more often. I am going to house hack.
Professional · Parsippany, NJ · Member since 2013 · 384 posts · 262 votes
7y
The highest property taxes in the Nation. Overpopulation and lower housing inventory has lead to over inflation of real estate prices. The only cheap area is Irvington which is located in the middle of Essex near Newark. However, the property taxes here are HIGH, rents are okay at best, many of the homes need a lot of work to bring it up to current code (by town) and some streets you might not want to live on!!!! Keep looking the right street is worth it
@Angelo Mart Thanks for the encourgement. I do see alot of inventory that are affordable but they look like they are going to need some TLC and that is where I am a little nervous since I've never done a rehab before but it's something I will have to do and it also what made me attracted to Essex County: Fixer Uppers and proximity to NYC.
Newark, NJ · Member since 2016 · 37 posts · 9 votes
7y
Hey @Marsha Fills,
Good luck on your search, I hope you find your ideal property in Essex county.
I dont have decades of exp in the REI game like most of the folks advising you but I've been house hacking in Newark NJ for almost a year now and I grew up in the area so maybe my two cent can hopefully help a little bit.
From my exp I've learned i have to be more hands on and in person when cooperating with City Hall sometimes. The city workers tend to drag their feet and it can be hard to get diligence done if you only call and or email. This can be annoying especially is you juggling a FT in the start.
When it comes to rents comps Newark can really vary from block to block/ neighborhood to neighborhood and that's sort of the same case when it comes to crime (although it is getting better).
Flipper/Rehabber · North Brunswick, NJ · Member since 2017 · 141 posts · 104 votes
7y
NJ is def a tough and competitive market. I say this all the time. The demand for property is high, but the supply is low. A lot of the guys dominating Real Estate are in HOT markets like Florida, North Carolina, Atlanta, Indianapolis, Pennsylvania, and etc. In Jersey it's tough, so it requires more effort to have a consistent business of deals. That's why many investors in Jersey are focused on new construction or building a portfolio because we know it's hard to find houses to flip or wholesale.
Another thing to keep in mind is some towns are not short-term rental friendly (airbnb) and have instituted ordinances to essentially ban them. Just keep that in mind when you choose locations as that may remove an option for your other unit(s) while you house hack. Best of luck!
Investor · Tampa, FL · Member since 2013 · 2k+ posts · 1k+ votes
7y
@Marsha F. NJ is a saturated market with little ability to add inventory like many other markets. It's also very left on the political scale which means most towns have strict zoning laws preventing one from changing what's here already. On top of that when it comes to rent control every town is different and you need to understand how to navigate based on that. What that simply equates to is that the barriers to entry here are higher, and I personally think that's a good thing. The easier it is to enter a market, the more volatile it is when there are issues with the real estate market. What makes NJ different from every other state is that we sit in between to very major US Cities. Obviously NYC is the bigger draw of the two and as time continues to go on northern NJ becomes ever more a part of the NYC area dynamic.
What NJ brings is a good combination of cash flow and appreciation, which can be hard to do in other areas. Some will complain about the taxes, but the rent to tax ratio can be quite in line with other major metro areas. You just need to seek them out. There's no silver bullet for operating here due to rent control (if any) being different for each municipality. So you need to do your research, that's all. Just do your best to not listen to those who aren't experience in holding property here long term. NJ has been very good to me personally.
Rental Property Investor · NJ/PA · Member since 2016 · 555 posts · 149 votes
7y
NJ actually IS a good market, especially areas close to nyc and with low crimes. High appreciation and good enough cash flow. It takes time to know that.
Bayonne, NJ · Member since 2017 · 32 posts · 16 votes
7y
Prices are blowing up right now, especially Newark and Irvington, there is a lot of inflation in the prices. The competition is tough as a flipper, as the fixer uppers houses are overpriced for that. Be careful not to over compete and get caught in a bad deal. Don't buy based on the future value if you are planning to flip. For a BRRRR strategy, it is a bit different, however. A property may be worth the fight as people are very optimistic about the future in the area to bring higher rents.
@Darren Sager Thank you for the positivity. I do think there is promise in NJ but I can see how others may think its an unattainable market. Like I said...it is better than NY.
What worries me is the political atmosphere. The state seems so corrupt! And these rent control laws are going to kill profit!
@Pearly Tan I personally don't believe that Airbnb will be a profitable business model in the future due to all the regulations...at least not in high populated areas like NYC and JC. If I am able to Airbnb my room while I am away on vacation than that's great but I ultimately will not rely on it for cash flow but definitely good to keep in mind. I completely forgot about Airbnb because of my views on it.